Arkansas Estate, Trust & Inheritance Litigation & Disputes

A Little Rock, Arkansas Lawyer's Ramblings About Estate And Trust Conflicts; Probate And Power Of Attorney Litigation; Inheritance Law And Lawsuits; Accounting Actions; Claims By Or Against Fiduciaries; Interpretation Issues; Fights About Estate And Trust Expenditures And Money Management; Disputes Over Joint Accounts, Beneficiary Designations, Missing Assets And Property Ownership; Self-Dealing And Bad Investments; Claims Of Fraud And Undue Influence; Financial Abuse Of The Elderly; Questions Of Mental Capacity And Competency; Fiduciary Duties And Beneficiary Rights; And Any Other Fights Over The Family Fortune.

Frequently trust litigation stems from a heated dispute between trustees and beneficiaries, or co-trustees who cannot agree on the trust administration, or beneficiaries who cannot agree on their respective rights under a trust instrument, or other disagreements between various parties incident to a trust. When such disputes cannot be resolved amicably by the parties themselves, with or without the assistance of legal counsel, sometimes the only practical recourse is to file suit and let a judge or jury decide who should prevail depending upon the facts, circumstances and evidence.

With this in mind, Ark. Code Ann. § 28-73-201(b) does not mandate continuing court supervision of trusts. Rather, a court may intervene in the administration of a trust whenever it is asked to by an “interested person or as provided by law.” Ark. Code Ann. § 28-73-201(a). Such judicial proceedings involving a trust “may relate to any matter involving the trust’s administration, including a request for instructions and an action to declare rights.” Ark. Code Ann. § 28-73-201(c) (emphasis added).

In sum, occasionally trust-related judicial proceedings do not involve an alleged breach of trust, breach of fiduciary duty, misappropriation of assets, etc. That's a good thing because such disputes---often involving family members fighting over money---can turn into some of the ugliest and most contentious wealth wars imaginable.

Rather, petitions for instructions and requests for declaratory judgments---such as the ones contemplated in Ark. Code Ann. § 28-73-201(c)---are typically less heated because theoretically they involve an innocuous request that the court merely provide instructions or guidance to the trustee or beneficiaries. Perhaps the proceeding stems from an alleged ambiguity in the trust terms, maybe there is a question regarding which beneficiaries are supposed to receive trust income or principal, or possibly the court is simply being asked to declare the rights and obligations of various individuals associated with the trust.

While these matters can still be adversarial in nature, they are usually not the classic battles in which someone is claiming that another party necessarily engaged in intentional fraud or other wrongdoing. Accordingly, when appropriate this type of proceeding should be considered as an option whenever there is a need for court intervention in a situation which does not necessarily rise to the level of a full-blown "divorce on steroids," as we sometimes call the nastiest of the inheritance-related disputes in which we are frequently asked to become involved.

Matt House can be contacted by telephone at 501-372-6555, by e-mail at mhouse@jamesandhouse.com, by facsimile at 501-372-6333, or by regular mail at James, House & Downing, P.A., Post Office Box 3585, Little Rock, Arkansas 72203.

I love pie, and it's probably my favorite type of dessert. I have fond childhood memories of my Grandmother making fantastic butterscotch meringue pies whenever we would travel to her house back when I grew up in Oklahoma. Every Fall I look forward to eating pecan pie, and I can cook a pretty good one using a recipe and method that I read about in Southern Living magazine many years ago. In my opinion, cakes, cookies and other desserts pale in comparison to a big slice of pie accompanied by a big scoop of Blue Bell ice cream (or Arkansas-based Yarnell's).

That said, I find that when talking to clients it is often helpful to explain estate, trust, probate and inheritance litigation and disputes in terms of "pie." For example, sometimes the question is "who gets a piece of the pie?" There could be a conflict about who the beneficiaries are in a will or trust. Or, if there was not a will or trust a Court could need to determine who the deceased's heirs are for purposes of intestate succession. If a will or trust sought to exclude someone and they challenge it, the enforcement or non-enforcement of that term could dictate whether or not they get a piece of the pie at all.

Sometimes the issue revolves around "how big a slice does everyone get?" For example, a will or trust often leaves different types or percentages of property to different people or entities. In an intestate estate where the deceased did not leave a will or trust (or perhaps those documents were found to be invalid), one's status as a surviving spouse, surviving child, surviving parent, surviving sibling, surviving grandchild, etc. will determine the size and extent of one's piece of the pie.

Other times the question involves "what is even in the pie?" What I mean by that is that property formally conveyed to a trust should pass through the trust, but property not conveyed to that trust will pass outside the trust (typically through the estate). Likewise, whether or not an estate is formally opened or a trust even exists, some property can automatically pass by beneficiary designations (IRA's, life insurance, etc.) or operation of law (transfer on death accounts, joint tenants with right of survivorship accounts, etc.) instead of passing to or through a trust, estate, etc.

Finally, occasionally the concern focuses upon "whether anyone ate some (or all) of the pie before it got sliced up?" In other words, if there was a misappropriation of monies or assets the dispute may necessarily be primarily concerned with (1) attempting to investigate, locate and recover the missing property, and (2) holding whomever took it civilly or criminally responsible, if appropriate.

Matt House can be contacted by telephone at 501-372-6555, by e-mail at mhouse@jamesandhouse.com, by facsimile at 501-372-6333, or by regular mail at James, House & Downing, P.A., Post Office Box 3585, Little Rock, Arkansas 72203.

Today one of my law partners, Pat James, and I will be privileged to make a presentation at the Arkansas Bar Association Annual Meeting in Hot Springs, Arkansas, where over 1,200 lawyers and judges congregate every June for 4 days of continuing education seminars, meetings, and socializing. The title of our presentation is---not surprisingly given that you are reading this blog---"WEALTH WARS: Arkansas Estate, Trust, Probate And Inheritance Litigation."

The hour-long presentation is designed to be a broad overview, for the general practitioner, of numerous topics arising in this area of law. For an A to Z listing of the topics to be discussed, inclusive of some written materials containing a checklist of common claims and causes of action; a checklist of common defenses; an exemplary case theme (the “fraud triangle”); a lengthy list of Arkansas statutes frequently arising in litigated estate and trust matters; and citations to a few helpful general and Arkansas-specific secondary materials, please click on the following link: Written Materials For June 2016 CLE Presentation

Matt House can be contacted by telephone at 501-372-6555, by e-mail at mhouse@jamesandhouse.com, by facsimile at 501-372-6333, or by regular mail at James, House & Downing, P.A., Post Office Box 3585, Little Rock, Arkansas 72203.

As stated in my previous post regarding the capacity of a testator to execute a will or trust, the two concepts are closely related. For example, incapacity relates to invalidation of a will, trust, deed, etc. because of the testator’s own deficiencies (typically mental impairment). Undue influence, however, is when the will, trust, deed, etc. may be invalidated by the actions of others because they allegedly exercised such a degree of influence and power over the testator thatthey were induced to act by something other than free will.

As a general matter, the less testamentary capacity that one possesses, the less proof of undue influence will be necessary. A presumption of undue influence may be triggered by a confidential relationship between the testator and someone who is receiving a benefit from the document, such that the burden of proof can shift to the proponent of the document to prove that there has in fact been no undue influence. Unless there is “procurement” involved, in Arkansas the proponent merely has the burden of proving no undue influence by a preponderance of the evidence (more likely than not, as opposed to a higher standard such as beyond a reasonable doubt).

Obviously influence is ever-present and we are constantly influencing others to take certain actions. This is especially true in the context of family and other close relationships. However, mere influence doesn’t necessarily equate to taking advantage of someone.

Accordingly, while a testator may be legitimately influenced by his children, for example, the influence may go too far if the kids dictate or control the testator. Likewise, the mere existence of a confidential relationship between the testator and the beneficiary, or a close and affectionate relationship, may not in and of itself constitute undue influence although it can in some instances have the effect of shifting the burden of proof.

Matt House can be contacted by telephone at 501-372-6555, by e-mail at mhouse@jamesandhouse.com, by facsimile at 501-372-6333, or by regular mail at James, House & Downing, P.A., Post Office Box 3585, Little Rock, Arkansas 72203.

People often question whether a deceased person was mentally capable of executing or changing a will or trust. Perhaps the person was suffering from dementia at the time. The legal question involved in these situations is typically whether the decedent had the requisite “testamentary capacity.” Testamentary capacity has generally been deemed to mean sufficient mental ability to (1) understand and remember, without prompting, the extent and condition of the testator’s property; (2) understand the “natural objects of their bounty;” and (3) understand to whom the property is being given and on what terms.

Testamentary capacity is not a particularly high state of mental capacity, but it can be rebutted in some instances by evidence of Alzheimer’s Disease, severe forms of dementia, severe illness, intoxication, etc. These conditions need to have actually existed at the time of execution of the instrument in question. For example, the mere fact that mild dementia is diagnosed years before the execution of the instrument does not necessarily mean that the testator lacked capacity when they executed their will or trust, because even a lucid interval of capacity (and people suffering from dementia often have “good days” and “bad days”) can be deemed sufficient.

Capacity issues are very fact-intensive determinations, and lack of capacity is often pretty difficult to prove. This is why capacity claims are often coupled with “undue influence” claims, which are often related, frequently alleged in the addition or in the alternative, and sometimes easier to prove. Undue influence will be discussed in my next post.

Matt House can be contacted by telephone at 501-372-6555, by e-mail at mhouse@jamesandhouse.com, by facsimile at 501-372-6333, or by regular mail at James, House & Downing, P.A., Post Office Box 3585, Little Rock, Arkansas 72203.

I have long been interested in demographic trends, emerging technologies, cultural changes, and shifting societal patterns. For example, 20+ years ago when I was in college I read Alvin and Heidi Toffler's "War And Anti-War," which while a bit dated now predicts how future wars will be fought (but with an eye toward peace and avoiding such conflicts). Similarly, about 5 years ago I read George Friedman's "The Next 100 Years: A Forecast For The 21st Century," which was an eye-opening look at how our nation and world may likely look in the years and decades to come. I highly recommend either book for some fascinating reading, and it will be interesting to someday see how accurate or inaccurate their predictions were.

Then, a couple weeks ago I came across a very interesting article by a Georgia attorney named John J. Scroggin, in Wealth Strategies Journal, which focused in particular upon 30 positive and negative trends that will impact estate planning over the next several decades:"Where Is The Estate Planning Profession Going?" While I focus much of my law practice upon estate, trust and probate litigation---as opposed to estate planning and drafting of wills, trusts, and the like---the article still addressed my areas of interest and I thought I would share a couple excerpts here. Better yet, lawyers and laypersons should take the time to read the entire article which not only encompasses great analysis but also contains good references to other articles, checklists, outlines, etc.

For example, with regard to estate and trust litigation in general Mr. Scroggin opines that:

"(9) Estate and Trust Litigation. As a result of the combination of poorly drafted documents, dysfunctional families, incompetent fiduciaries, greedy heirs, inadequate planning and poorly prepared fiduciaries, estate litigation has been booming in the last few decades. This growth will continue.

One consequence of the increased litigation will be an increased effort by both individual and institutional fiduciaries to make sure estate and trust instruments provide for strong fiduciary protection. We should anticipate more protective provisions in fiduciary instruments, including broader indemnity provisions for fiduciaries, modifications of the normal fiduciary standards and investment polices, broader use of no contest clauses, limited liability for delegated powers and limits (or increases) on disclosures to beneficiaries. These changes will increase the need to create counter-balancing powers designed to protect beneficiaries (e.g., a wider use of Trust Protectors and fiduciary removal powers). As a result, there will be longer discussions with clients and the complexity of the documents will increase."

Related to the foregoing are Mr. Scroggin's thoughts on avoiding estate and trust litigation altogether, through conflict minimization:

"(10) Conflict Minimization. The corollary to estate and trust litigation is planning designed to mitigate the potential sources of intra-family estate conflicts. According to the Wealth Counsel 6th Annual Industry Trends Survey, the top motivation for doing estate planning was to avoid the chaos and conflict among the client’s heirs. Many clients have an abiding desire to establish structures which minimize the potential points of conflict and provide a mechanism to resolve future family conflicts. Clients want to dispose of assets in a manner designed to minimize family conflict - leaving a legacy of relationships rather than a legacy of conflict. This is a growing part of the discussion with clients and a part of their planning documents. Solutions include using personal property disposition lists, looking at real or perceived conflicts of interest when appointing fiduciaries, or passing the family business only to the children running the business. As noted above, attorneys will need to spend more time talking with clients about providing greater protections to fiduciaries and creating counterbalancing protections for heirs.

Many individual fiduciaries agree to serve without fully understanding the potential liabilities and conflict they may be inserting themselves into. Should attorneys provide written materials (perhaps signed by the client and the fiduciary) detailing the responsibility of the fiduciary, the risk of conflict and the means by which the drafter has tried to minimize those exposures? Should attorneys more thoroughly advise their clients on the necessary skill sets needed by their fiduciaries - instead of just accepting the client's choices at face value?"

In sum, as I have written before on this blog, American society is rapidly changing. The Baby Boomers have begun retiring over the last many years and will continue to do so over the next 2-3 decades. Large sums of wealth have been acquired and will be transferred to younger generations. People are living longer, and the aging population will be less competent due to Alzheimer's Disease and other forms of dementia which will lead to conflicts over whether a deceased person had the requisite capacity to execute a will or trust. These and other trends strongly support the notion that there will be increasingly more estate, trust and probate litigation in the decades to come.

Matt House can be contacted by telephone at 501-372-6555, by e-mail at mhouse@jamesandhouse.com, by facsimile at 501-372-6333, or by regular mail at James, House & Downing, P.A., Post Office Box 3585, Little Rock, Arkansas 72203.

Often estate and trust litigation revolves not around the will or trust itself, but rather changes to those instruments (a codicil to the will, an amendment to the trust, etc.). That was the case in the recent appeal of Harbur v. O’Neal, et al., 2014 Ark. App. 119 (February 19, 2014). The matter involved numerous issues, but one of them entailed the question of whether or not certain amendments to a trust were valid.

Frequently the settlor of a trust has a legitimate reason for wanting to amend their trust. Perhaps they want to change a successor trustee, remove or add a beneficiary, alter the trust’s assets, or there could be any number of other reasons why the trust may need to be amended. However, it is important that the settlor of the trust amend their instrument with the competence to do so, of their own free will and volition, without being coerced, and without undue influence by someone else. That was one of the disputes in the Harbur case.

Specifically, like so many cases that I handle and so many estate and trust litigation matters in general, this lawsuit involved battling siblings and children of the trust settlor. One of the litigants, Jeanne, was found to have performed every step of obtaining information regarding a first trust amendment, she actually prepared the amendment, she produced and finalized the document, and she also benefitted from the amendment.

The trial court held that because these facts supported a conclusion that Jeanne procured the trust amendment, a rebuttable presumption of undue influence arose and the burden of proof shifted to Jeanne to prove beyond a reasonable doubt that her mother had both the mental capacity and freedom of will at the time she executed the trust amendment.

Likewise, Jeanne also testified that she prepared a second trust amendment for her mother’s signature as well. This amendment made Jeanne the sole beneficiary of the trust upon her mother’s death, and made Jeanne’s children sole beneficiaries of the trust if Jeanne did not survive her mother.

Similar to the reasons stated for finding procurement with regard to the first trust amendment, the trial court also found that Jeanne had procured the second amendment. The appellate court affirmed these rulings holding that there was overwhelming evidence of procurement, including but not limited to Jeanne’s own testimony.

A number of lessons can be learned from this case. For example, this appeal demonstrates that the settlor’s intent should control and they should be able to dispose of their property as they wish, without coercion or undue influence from anyone. If and when they do want to amend the trust, they either need to do it by themselves or preferably with the assistance of a trusted attorney who is acting solely in their interest and whom is independent from the beneficiaries.

Further, a beneficiary should consider not preparing the trust amendment, even at the request of a settlor, because that beneficiary may be risking the validity of the very amendment from which they would benefit if someone attempts to set aside the trust amendment based upon procurement, undue influence, coercion, and the like.

In sum, amendments to wills and trusts are fertile ground for estate and trust litigation because frequently the changes are executed many years after the original documents are signed. Amendments can, in a very short and sweeping document, fundamentally change the intent of the original estate planning documents and the assets disposed of by those documents. Such amendments are sometimes signed in haste or at a point in the deceased person’s life when they may not fully understand or appreciate the nature of what they are doing (assuming the settlor signed the amendment(s) at all).

With the stroke of a pen, millions of dollars and valuable real or personal property can be inherited by or administered by persons other than those initially envisioned by the original instruments. For these reasons, as much or even more care should go into the preparation and execution of the amendments as go into the original versions. Similarly, as much or more scrutiny should be paid to the preparation and execution of these amendments as was paid to the initial documents.

Matt House can be contacted by telephone at 501-372-6555, by e-mail at mhouse@jamesandhouse.com, by facsimile at 501-372-6333, or by regular mail at James, House & Downing, P.A., Post Office Box 3585, Little Rock, Arkansas 72203.

Estate, trust, power of attorney and probate disputes often develop due to disagreements over the manner in which someone managed another person's money. For example, the beneficiaries of a will might disagree with the executor's claim for fees related to administration of an estate. Co-trustees might differ as to the best investments for maximizing the income and assets of a trust. Two children might question the propriety of their third sibling's withdrawals of money from their mother's bank account, pursuant to a financial power of attorney that the mother apparently executed at some point in the past.

To provide guidance in these situations, the Consumer Financial Protection Bureau has recently released 4 booklets entitled "Managing Someone Else's Money" which are intended for such persons as trustees, agents under powers of attorney, court-appointed guardians, and government fiduciaries. Not only do they assist those who are honestly and legitimately attempting to assist in the management of money or property for a loved one, they also provide information on warning signs and things to look for when someone else is doing the managing of that person's finances.

Matt House can be contacted by telephone at 501-372-6555, by e-mail at mhouse@jamesandhouse.com, by facsimile at 501-372-6333, or by regular mail at James, House & Downing, P.A., Post Office Box 3585, Little Rock, Arkansas 72203.

In a middle-of-the-night deal during jury selection of a New York trial, it appears that a settlement has been reached in the infamous Huguette Clark estate dispute. You can read all about it at this link. I had written about this over 3 years ago back in August 2010 at this link. This litigation serves as a very interesting case study in undue influence allegations and other issues commonly associated with estate and trust disputes. A more comprehensive overview of the stories, videos, and other coverage of this saga can be found at this link.

Matt House can be contacted by telephone at 501-372-6555, by e-mail at mhouse@jamesandhouse.com, by facsimile at 501-372-6333, or by regular mail at James, House & Downing, P.A., Post Office Box 3585, Little Rock, Arkansas 72203.

There is often confusion regarding what property falls within an estate, or trust, and what property falls outside of either. For example, commonly bank accounts, IRA’s, etc., are titled in such a way that upon one person’s death, the remaining monies are left to the other person or person(s) identified on the account paperwork such that this property passes outside the estate or trust. It can often be a difficult task to demonstrate that this money should be divided in a different manner.

However, the Arkansas Court of Appeals recently affirmed a trial court’s ruling that this was what was supposed to occur, in the case of Richardson v. Brown, 2012 Ark. App. 535 (September 26, 2012) stemming from Faulkner County Circuit Court. This was actually a case that I handled on behalf of a client, and the Judge ruled in his favor. The ruling was left wholly intact by the appellate court.

Without going into too much detail, the parties' mother passed away leaving three children as her heirs. Certain property passed to the children pursuant to a will, but the mother had other property (a car, bank accounts, IRA, etc.) that were titled in various ways as between her and her individual children. Our client argued that despite the titling on the various property, the three children had in fact an oral agreement, as demonstrated by the later actions and conduct of the children, to split all of the properties evenly. He had received the “short end of the stick” and, basically, believed that his sisters had intentionally deprived him of his equal one-third share.

In a hard fought battle, our client ultimately prevailed at trial and proved that, notwithstanding the titling on the various properties, there was an express agreement among the siblings to equally divide the various accounts. The trial court imposed a judgment and a substantial attorneys’ fee award, both of which were affirmed by the Court of Appeals.

In doing so, among other things the Court ruled that ordinarily ownership of a joint bank account with a right of survivorship is conclusive proof of the parties’ intent for the property to pass to the survivor. However, this general rule does not prevent the survivor from making a different disposition by agreement, and in this case the trial court determined that such an agreement had in fact been made among the siblings. This is a difficult argument to make, because courts presume that the titling on an account is strong evidence of how that property is to be distributed. But, if the facts and evidence warrant it, this case demonstrates that a court will sometimes hold that an agreement to divide the property otherwise will prevail over the titling of an account.

Matt House can be contacted by telephone at 501-372-6555, by e-mail at mhouse@jamesandhouse.com, by facsimile at 501-372-6333, or by regular mail at James, House & Downing, P.A., Post Office Box 3585, Little Rock, Arkansas 72203.

Arkansas Wealth Wars

Thoughts And Commentary From A Little Rock, Arkansas Lawyer About Estate And Trust Conflicts; Probate And Power Of Attorney Litigation; Inheritance Law And Lawsuits; Will And Trust Contests; Accounting Actions; Claims By Or Against Fiduciaries; Interpretation Of Wills And Trusts; Fights About Estate And Trust Expenditures And Money Management; Disputes Over Joint Accounts, Beneficiary Designations, Missing Assets And Property Ownership; Accusations Of Self-Dealing, Bad Investments And Power Of Attorney Abuses; Claims Of Fraud And Undue Influence; Financial Abuse And Duress Of The Elderly; Questions Of Mental Capacity And Competency; Fiduciary Duties And Beneficiary Rights.